A Word About Pricing

This is something new for the blog and I will look to post something of this nature each month… unless you tell me not to. Let me know what you think.

As you know this blog is dedicated to reviewing wines under $20 but the cruel reality is that what is $20 in BC is $15 in Alberta or $8 in California, so I thought I would throw my two cents in as to why I think our pricing in BC is not only a detriment to the economy but also creates negative consumption behaviour instead of curtailing it.

For years the industry has criticized the government about its mark-up/tax structure in BC. It’s a structure that sees you and me pay some of the highest prices for wine, beer and spirits in North America. The question has long been why?

Close to a century ago BC, like other provinces in Canada and states in the US, shed the legal cloak of Prohibition in favour of control over pricing, regulation and distribution. Here in BC the government determined that high prices, and therefore high taxation, would limit consumption, specifically the kind of conspicuous consumption that leads to a tearing of the social fabric, and if that didn’t work, they would make booze hard to get.

There isn’t any evidence anywhere that shows higher prices curtail negatives for the long term. The stigma about drinking and driving has become entrenched in our culture and that had nothing to do with pricing. Consumers in California don’t drink 5 times more because their prices are 20% of ours. In fact they have similar consumption to us, but a more vibrant and diverse wine culture that has spawned numerous economic opportunities that couldn’t possibly exist here.

Positive culture no matter if surrounds a society, sport, food or wine is not born of elites and graciously handed down to those less fortunate. Quite the contrary. History shows us that the culture that defines a nation or group comes from the ground up. In addition our culture is the cornerstone of our economic wealth. By entrenching high prices we secure the negative aspects of alcohol consumption and become impotent at solving the root causes, while making government increasingly dependent on the tax dollars that flow each year into general revenue and squelching innovation and investment.

What changes to make? My suggestion is start with a flat tax instead of an ad volerum tax. Second insure that the rules are applied equally to all those who choose to participate in the industry. Third, remove the government monopoly on distribution. After that pour yourself a glass of your favourite wine, sit down and relax… BC will be a better place.

There are also a few studies, by Dr. Stockwell, that shows that after new liquor licenses for BC cold beer and wine stores (CBAW) per capita drinking has gone up. I don’t have a link for that, so you will have to take my word for it.
This does suggest that we as a population with spend the entire contents of our wallets on beer. If beer is cheaper, we drink more. However on an individual level this does not make sense. If I want a bottle of Cascade Brewing Kriek, then I will just buy it. If it is $40 I will buy one bottle, but if it were $10 I would not buy four. When I am at a friends house, who has spent the entire contents of his wallet on beer, I will still only drink 3 bottles.
It does seem that these findings are being skewed but some population, most likely college students. We all know they will empty their wallets for beer.

Thanks for the comment. In fact my thoughts are a direct function of Dr. Stockwell’s reports.

There are two functions are play here in my estimation.

1) When prices go up or down, for anything, consumption changes, either up or down. However this is a short term effect and Dr. Stockwell doesn’t adequately account for this. In fact his peers have criticized him for this exact issue (I will pull up the link and send it along). If his claims transcend time and are confined to price then the opposite would be true. $2 worth of wine in BC will get you a glass, whereas in California it can get you a bottle. If price were the determining factor surrounding consumption then people in California must either be drinking 5x more/capita than we do. This is not true. In addition when people from BC travel to California instead of enjoying a glass of wine for $2, they would drink the whole bottle instead. Also not true.

2) There is about 5% of the population who are very price sensitive and change their short and long term purchasing behaviour as a result. It is not true that these 5% are those with drinking problems. Drinking problems occur up and down the socio-economic ladder.

Again culture is what changed drinking and driving patterns, not price. A positive culture that doesn’t penalize responsible consumption will have a greater positive and preventative effect than pricing. Entrenching pricing as the magic pill is ineffective and has negative, long term consequences.